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Estonia: Net profit of Eesti Energia grows to EUR 106 mln in 2018

BC, Tallinn, 28.02.2019.Print version
The sales revenue of state-owned Estonian energy group Eesti Energia grew 16% on year to 875 mln euros in 2018, while the company's net profit rose 5% to 106 mln euros, informed Eesti Emergia representative.

The sales revenue of state-owned Estonian energy group Eesti Energia grew 16% on year to 875 mln euros in 2018, while the company's net profit rose 5% to 106 mln euros.

Earnings before interest, taxes, depreciation, and amortization (EBITDA) amounted to 283 mln euros, 7% more than the year before, Eesti Energia said.

Andri Avila, CFO of the group, said that the result is satisfying. "Even though the entire year was strong in terms of financial indicators, a large contribution to achieving the final result was made by a very good fourth quarter, where sales revenue totaled 261 mln euros, EBITDA totaled 95 mln euros and we earned a net profit of 40 mln euros," Avila said.

According to the CFO, increased market prices of oil and electricity and increased shale oil production were the main factors to help increase the company's revenue and profit. At that, the market price of electricity in the Nord Pool price area Estonia rose 42% on year.

"There are two main reasons for such a big increase in the market price of electricity. Firstly, the level of Scandinavian hydro resources fell to a significantly lower level than average in the second half of 2018 and this increased the prices of electricity in addition to Scandinavia also in the Baltics. The second important reason for the increase in electricity price was the three-fold increase in the price of CO2 quotas compared with the average level of 2017. As a large part of electricity in Europe is still produced from fossil fuels, the CO2 price hike raised the market price of electricity very widely," Avila said.

However, the rise in CO2 prices in the Nord Pool market area has not brought about the effect that the European Union has wanted in the form of higher taxation of fossil fuel power generation, he said.

The electricity sales volume of Eesti Energia was 9.2 terawatt-hours in 2018, remaining on the same level as in 2017. Thanks to an increased market price and the improved reliability of oil plants, Eesti Energia sold 393,000 tons or 6% more shale oil than in 2017. The production of shale oil reached a record 411,000 tons.

"The aim of EU's CO2 policy is to support increasing the production of energy from renewable sources. What we actually saw in the Baltics and in Finland in 2018 was that more Russian-origin fossil electricity than ever, or over 13 terawatt-hours, reached our market through Lithuania and Finland, which is equal to 1.5-fold annual consumption in Estonia. Even though unlike EU producers, Russian electricity producers do not need to purchase a CO2 quota for electricity production, they can participate in the same market with their production as EU electricity producers. This creates an unfair competition situation and, in conclusion, kills the EU industry," Avila said.

The sale of electricity and provision of energy services was launched in 2018 in Finland and Sweden, where the company is currently focusing on growing its customer portfolio. Eesti Energia is selling energy and energy solutions on a total of six domestic markets, including Estonia, Latvia, Lithuania, Poland, Finland and Sweden.

In 2018, the group invested 215 mln euros in fixed assets, which is 49 % more than the previous year. The largest share of this amount was made up of investments to improve the electricity network amounting to 82 mln euros. As a result of long-term investments, two thirds of the network of distribution network operator Elektrilevi is weatherproof by now. Last year, Eesti Energia made the final payment to General Electric (GE) for the Auvere power plant. The total cost of the Auvere plant was 610 mln euros.

"Auvere power plant is Eesti Energia's most efficient and clean controllable electricity production device, which is important in terms of Estonia's security of supply. With the Auvere power plant, we are also able to produce renewable energy in the amount of 50%. Good opportunities for using that capacity are created by the EU's renewable energy statistics trade, with the help of which we could earn export income with the support of other EU countries," Avila said.

"However, the year's biggest investment was the acquisition of Baltic wind energy producer Nelja Energia. As a result of that transaction, Eesti Energia's subsidiary Enefit Green became the region's leading renewable energy producer with a presentable development portfolio. In addition, the Auvere power plant and the production assets of the acquired Nelja Energia will help replace the older Narva power blocks, which will stop work this year, in the amount of 600 megawatts," he added.

Eesti Energia has made a proposal to the owner to pay a dividend of 57 mln euros for 2018, to which income tax in the amount of approximately 14 mln euros will be added. The tax footprint of the Eesti Energia group in Estonia last year was 224 mln euros. Of this, 66 mln euros was made up by taxes involving the workforce, which makes Eesti Energia the largest labor tax payer in Estonia.

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